This article will review Empire Fixed Income Special Situations bond, and say what investors can do now they are in administration according to various media reports.
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Firstly, what were the basics about this investment?
This investment was a bond/loan note. The investors were lending money for Empire to develop properties in the UK.
The focus was on ethical and socially responsible investing.
The minimum investment threshold was 20,000 Pounds, but investors needed to be high-net-worth, sophisticated investors or certified high-net-worth individuals to apply.
In other words, this wasn’t a retail investment, so most investors went through financial advisors.
Like other investments similar to this, the investors were risking their capital, betting that the investment returns will be there.
A few years ago, Empire released a two-year fixed income income product called the special situations corporate bond to the market, with returns between 11%-15% per year offered.
What are some examples of their projects?
Empire have invested in a lot of deprived areas in the UK.
Examples include Globe Works Bolton and Consort House Doncaster.
The picture below, from the Bolton News, shows the Bolton project.
What were the positives associated with this investment?
For a select few high-net-worth clients, the risk might have seemed worth it.
What is more, with ESG/socially responsibility investing now see as more important for investors, this project was seen as ethical by many.
The FCA-regulated security trustee also added some basic protections.
As the investments are asset-backed, moreover, a default doesn’t automatically mean clients lose money.
What were the negatives associated with this project?
The projects were always high-risk.
What is more, the security trustee doesn’t protect clients money from an investment strategy that goes wrong.
The trustee merely makes sure that money isn’t being misappropriated, and is being used in the same manner that the investment informational memorandum indicated.
What can you do if you have invested?
If the reports from the article above and here are correct, you can’t do anything apart from wait, as the loan notes will probably be affected.
Hopefully the assets will be sold off and you will be returned some money. The process won’t be short.
If you have bought two or three investments like this, it makes sense to get a review of your entire portfolio, which I have done for other clients.
It can make sense to lower the risk of your entire investments given what has happened here.
What lessons can be learned?
Ultimately, it is fine to invest in higher-risk investments, but only if you are willing to take a loss and keep such investments down to a small part of your overall portfolio and wealth.
Conclusion
It isn’t clear which of Empire’s projects will be affected by the news media reports. It also isn’t clear which investors are at risk of losing money, including loan note and bond investors.
Regardless, investments like this always carry risk.
People should only invest if they are willing to take a risk to lose money.
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